DETROIT — Despite the rapid expansion of Michigan farmland dedicated to growing hops and grains for the state’s craft beverage sector, experts say the industry has more room to grow.

A new Michigan State University Product Center study examines the potential economic impact for Michigan craft breweries to produce beer exclusively with in-state ingredients.

It found the craft beer agricultural sector could generate up to $60.9 million in total economic output and create more than 1,300 jobs if craft brewers in the state only produced beer with Michigan-grown ingredients.

Steve Miller, an associate professor at MSU, presented the study yesterday in Detroit at the annual Great Lakes Hop and Barley Conference.

The findings are based on 2015 state production figures showing Michigan breweries produced nearly 520,000 barrels of beer that year, according to data from the Brewers Association, a Boulder, Colo.-based trade group for independent brewers.

The Brewers Association said updated state production data for 2016 should be available by April or May.

Michigan grown and processed ingredients, including hops, malt and barley, accounted for approximately 7 percent of the beer produced in the state in 2015, or the equivalent of roughly $4.2 million in economic impact, according to the study. Miller estimates the craft beer agriculture sector employed approximately 96 workers in that year.

Despite the potential for growth in the agriculture supply chain serving craft beer outlined in the study, the industry still has a long way to go before that can become a reality, Miller said.

“It really depends on the consumer,” Miller wrote in an email to MiBiz following his presentation. “If consumers are willing to pay more for local ingredients, this can be a very viable market. But we really have not seen consumers show this level of interest. They do want beers brewed locally, but whether they will respond to locally-sourced ingredients remains to be seen.”

Miller noted the concept of an all-in-state supply chain faces roadblocks stemming from the lack of malting capacity for Michigan-grown barley and grains, as well as pricing pressures from global conglomerates.

Outside of malted barley, hop growers interviewed by MiBiz also are hesitant at the prospect of Michigan agriculture supporting all of the beer produced in the state.

“I just don’t think there’s enough public varieties out there to supply Michigan brewers,” said Brian Tennis, co-founder of the Michigan Hop Alliance. “Even if there is a tax incentive, they just don’t have enough public varieties that the brewers are interested in (using). There’s not enough interest (in Michigan-grown hops) I don’t think.”

That said, Tennis said he could see the 7-percent share of Michigan agriculture dedicated to craft beer production increasing over time.

Regardless of Michigan craft brewers’ use of locally grown ingredients, hop farmers see further opportunities for exporting hops outside the state.

For Tennis, those opportunities come from catching the industry’s attention with unique hop varieties that aren’t grown in the Pacific Northwest, the traditional hop-producing area. Tennis’ Michigan Hop Alliance plans to add six different varieties of hops this year at its 60-acre farm in Omena, located on the Leelanau Peninsula northwest of Traverse City.

Moreover, the company has branched off into brokering hops as a way to bolster the sales of its own products. The goal is to import “the weirdest stuff we can find. That’s really what brewers are looking for,” Tennis said.

Michigan growers often lack access to proprietary hops that many brewers use, and they struggle to compete on pricing with popular varieties coming out of the Pacific Northwest, Tennis added.

But some Michigan hop growers have found a market for more common varieties such as Chinook by marketing the unique flavor characteristics the hops take on from growing in Michigan compared to the same varieties grown in different regions.

“Michigan will never be on the global alpha acid market,” said David Sipes, executive vice president of Hickory Corners-based Hop Head Farms, which grows approximately 260 acres of hops. “The closer you get to a commodity, it’s going to be more difficult. With the terroir that we’re bringing, much like wine grapes — bringing a unique character — it’s not the same hops. That’s our opportunity.”